What changed in this filing

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Item 1. Financial Statements

2024-07-30 compared with 2024-04-30 · 259 added, 131 removed, 479 unchanged (45% of the section changed)

6 unchanged sentences

Cash and cash equivalents $ 987,293 $ 3,213,376

Marketable securities—available-for-sale (amortized cost $ 506,379 and $ 442,816 as of March 31, 2024 and December 31, 2023, respectively;

allowance for credit losses $ 0 as of March 31, 2024 and December 31, 2023)

Marketable securities—available-for-sale (amortized cost $ 464,272 and $ 442,816 as of June 30, 2024 and December 31, 2023, respectively;

allowance for credit losses $ 0 as of June 30, 2024 and December 31, 2023)

462,207 442,667

Short term equity investments 69,875 —

Accounts receivable 739,050 743,557

3 unchanged sentences

Restricted cash 1,631 1,845

Long term investments 287,663 187,716

Long term equity investments 29,668 187,716

Inventory 255,268 206,965

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400,000,000 shares authorized;

224,533,449 and 224,286,862 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively

191,572,449 and 224,286,862 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively

Additional paid-in capital 4,382,734 5,016,122

Accumulated other comprehensive (loss) income ( 5,420 ) 13,106

Retained earnings 329,933 160,385

(Accumulated deficit) retained earnings ( 1,380,446 ) 160,385

Total stockholders’ equity 2,997,059 5,189,837

6 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2024 2023 2024 2023

Product revenues, net $ 906,566 $ 827,005 $ 1,636,489 $ 1,520,242

6 unchanged sentences

Selling, general and administrative 305,982 283,929 606,238 599,535

(Gain) loss on change in fair value of acquisition-related contingent consideration ( 456 ) 6,196

Loss on change in fair value of acquisition-related contingent consideration 893 8,374 437 14,570

(Profit) and loss sharing under collaboration agreements — ( 549 ) ( 1,025 ) ( 1,911 )

Total costs, expenses and other 1,521,889 760,830 2,310,880 1,544,733

Income from operations 91,898 24,770

(Loss) income from operations ( 478,130 ) 193,780 ( 386,232 ) 218,550

Interest income and other, net 49,769 42,668 94,513 75,541

Interest expense ( 657 ) ( 655 ) ( 1,087 ) ( 1,124 )

Unrealized gain (loss) on long term investments 99,947 ( 5,318 )

Income before provision for income taxes 236,159 51,856

Realized and unrealized gain on equity investments 39,241 41,811 139,188 36,493

(Loss) income before provision for income taxes ( 389,777 ) 277,604 ( 153,618 ) 329,460

Provision for income taxes 54,824 74,056 121,435 104,209

Net income $ 169,548 $ 21,703

Net income per share:

Net (loss) income $ ( 444,601 ) $ 203,548 $ ( 275,053 ) $ 225,251

Net (loss) income per share:

Basic $ ( 2.04 ) $ 0.91 $ ( 1.24 ) $ 1.01

Diluted $ ( 2.04 ) $ 0.90 $ ( 1.24 ) $ 1.00

Shares used in computing net income per share:

Shares used in computing net (loss) income per share:

Basic 218,175 223,248 221,329 223,104

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Three Months Ended

Net income $ 169,548 $ 21,703

Other comprehensive (loss) income:

Foreign currency translation (loss) gain ( 17,820 ) 3,260

June 30, Six Months Ended

2024 2023 2024 2023

Net (loss) income $ ( 444,601 ) $ 203,548 $ ( 275,053 ) $ 225,251

Other comprehensive income (loss):

Foreign currency translation gain (loss) 407 5,189 ( 17,413 ) 8,449

Unrealized (loss) gain on marketable securities, net of tax ( 254 ) 489 ( 2,000 ) 2,909

Defined benefit pension gain, net of tax 599 186 887 379

Other comprehensive (loss) income ( 19,278 ) 5,873

Comprehensive income $ 150,270 $ 27,576

Other comprehensive income (loss) 752 5,864 ( 18,526 ) 11,737

Comprehensive (loss) income $ ( 443,849 ) $ 209,412 $ ( 293,579 ) $ 236,988

See accompanying notes.

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Paid-in Capital Accumulated Other

Comprehensive (Loss) Income Retained Earnings Total

Comprehensive (Loss) Income Retained Earnings (Accumulated Deficit) Total

Stockholders’

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Balance at March 31, 2024 $ 224 $ 5,070,286 $ ( 6,172 ) $ 329,933 $ 5,394,271

Issuance of 316,997 shares of Common Stock upon exercise of stock options and settlement of employee restricted stock units and performance shares, net of shares withheld for taxes and 291,735 shares of Common Stock under the ESPP

— 13,792 — — 13,792

Issuance of 1,345 shares of Common Stock for services rendered

Stock compensation — 56,637 — — 56,637

Repurchases of common stock ( 33 ) ( 758,061 ) — ( 1,265,778 ) ( 2,023,872 )

Other comprehensive income — — 752 — 752

Net loss — — — ( 444,601 ) ( 444,601 )

Balances at June 30, 2024 $ 191 $ 4,382,734 $ ( 5,420 ) $ ( 1,380,446 ) $ 2,997,059

INCYTE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (CONTINUED)

(unaudited, in thousands, except number of shares)

Stock Additional

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Balances at March 31, 2023 $ 223 $ 4,856,914 $ 20,942 $ ( 415,511 ) $ 4,462,568

Issuance of 59,093 shares of Common Stock upon exercise of stock options and settlement of employee restricted stock units and performance shares, net of shares withheld for taxes and 216,168 shares of Common Stock under the ESPP

— 13,704 — — 13,704

Issuance of 1,282 shares of Common Stock for services rendered

Stock compensation — 54,928 — — 54,928

Other comprehensive income — — 5,864 — 5,864

Net income — — — 203,548 203,548

Balances at June 30, 2023 $ 223 $ 4,925,626 $ 26,806 $ ( 211,963 ) $ 4,740,692

See accompanying notes.

2 unchanged sentences

(unaudited, in thousands)

Three Months Ended

Six Months Ended June 30,

Cash flows from operating activities:

Net income $ 169,548 $ 21,703

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

Net (loss) income $ ( 275,053 ) $ 225,251

Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:

Depreciation and amortization 43,995 39,508

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Other, net 2,588 ( 3,670 )

Unrealized (gain) loss on long term investments ( 99,947 ) 5,318

(Gain) loss on change in fair value of acquisition-related contingent consideration ( 456 ) 6,196

Realized and unrealized gain on equity investments ( 139,188 ) ( 36,493 )

Loss on change in fair value of acquisition-related contingent consideration 437 14,570

Changes in operating assets and liabilities:

4 unchanged sentences

Accrued and other liabilities 27,428 92,500

Net cash provided by (used in) operating activities 218,811 ( 105,603 )

Net cash (used in) provided by operating activities ( 356,752 ) 200,923

Cash flows from investing activities:

Sale of long term investments — 45

Sale of equity investments 227,257 45

Capital expenditures ( 63,692 ) ( 19,243 )

2 unchanged sentences

Sale and maturities of marketable securities 182,634 150,487

Net cash used in investing activities ( 73,112 ) ( 28,559 )

Net cash provided by (used in) investing activities 140,708 ( 35,988 )

Cash flows from financing activities:

Repurchases of common stock ( 2,004,687 ) —

Proceeds from issuance of common stock under stock plans 14,960 28,367

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Effect of exchange rates on cash, cash equivalents, and restricted cash ( 663 ) ( 2,090 )

Net increase (decrease) in cash, cash equivalents, and restricted cash 132,610 ( 130,352 )

Net (decrease) increase in cash, cash equivalents, and restricted cash ( 2,226,297 ) 179,722

Cash, cash equivalents, and restricted cash at beginning of period 3,215,221 2,953,120

3 unchanged sentences

Unpaid purchases of property and equipment $ 800 $ 4,420

Unpaid excise tax on repurchase of common stock $ 19,185 $ —

Leased assets obtained in exchange for new operating lease liabilities $ 2,188 $ 5,275

3 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2024

June 30, 2024

Organization and Business

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The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X.

The condensed consolidated balance sheet as of March 31, 2024, the condensed consolidated statements of operations, comprehensive income (loss), stockholders’ equity and cash flows for the three months ended March 31, 2024 and 2023, are unaudited, but include all adjustments, consisting only of normal recurring adjustments, which we consider necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented.

The condensed consolidated balance sheet as of June 30, 2024, the condensed consolidated statements of operations, comprehensive income (loss), and stockholders’ equity for the three and six months ended June 30, 2024 and 2023, and the condensed consolidated statements of cash flows for the six months ended June 30, 2024 and 2023, are unaudited, but include all adjustments, consisting only of normal recurring adjustments, which we consider necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented.

The condensed consolidated balance sheet at December 31, 2023 has been derived from our audited consolidated financial statements.

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Three Months Ended

June 30, Six Months Ended

2024 2023 2024 2023

JAKAFI revenues, net $ 705,973 $ 682,384 $ 1,277,812 $ 1,262,353

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Losses Estimated

March 31, 2024

June 30, 2024

Debt securities (government) $ 464,272 $ ( 2,065 ) $ 462,207

3 unchanged sentences

Debt security assets were assessed for risk of expected credit losses.

As of March 31, 2024 and December 31, 2023, the available-for-sale debt securities were held in U.S.-government backed securities and in Treasury bonds and were assessed on an individual security basis to have a de minimis risk of credit loss.

As of June 30, 2024 and December 31, 2023, the available-for-sale debt securities were held in U.S.-government backed securities and in Treasury bonds and were assessed on an individual security basis to have a de minimis risk of credit loss.

Fair Value Measurements

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government debt securities that are classified as available-for-sale.

At March 31, 2024 and December 31, 2023, our Level 2 U.S.

Additionally, we have short term equity investments, which we intended to sell within one year, classified as Level 1 that were valued using their respective closing stock prices on The Nasdaq Stock Market.

At June 30, 2024 and December 31, 2023, our Level 2 U.S.

government debt securities were valued using readily available pricing sources which utilize market observable inputs, including the current interest rate and other characteristics for similar types of investments.

Our long term investments classified as Level 1 were valued using their respective closing stock prices on The Nasdaq Stock Market.

We did not experience any transfers of financial instruments between the fair value hierarchy levels during the three months ended March 31, 2024.

Our long term equity investments classified as Level 1 were valued using their respective closing stock prices on The Nasdaq Stock Market.

We did not experience any transfers of financial instruments between the fair value hierarchy levels during the six months ended June 30, 2024.

The following fair value hierarchy table presents information about each major category of our financial assets measured at fair value on a recurring basis (in thousands):

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(Level 3) Balance as of

March 31, 2024

June 30, 2024

Cash and cash equivalents $ 987,293 $ — $ — $ 987,293

Debt securities (government) — 462,207 — 462,207

Long term investments (Note 8)

Short term equity investments (Note 8)

69,875 — — 69,875

Long term equity investments (Note 8)

29,668 — — 29,668

Total assets $ 1,086,836 $ 462,207 $ — $ 1,549,043

9 unchanged sentences

Debt securities (government) — 442,667 — 442,667

Long term investments (Note 8)

Long term equity investments (Note 8)

187,716 — — 187,716

8 unchanged sentences

(Level 3) Balance as of

March 31, 2024

June 30, 2024

Acquisition-related contingent consideration $ — $ — $ 194,000 $ 194,000

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Contingent consideration earned during the period but not yet paid ( 8,893 )

Payments made during the period ( 9,544 )

Change in fair value of contingent consideration 437

Balance at March 31, $ 202,000

Balance at June 30, $ 194,000

The initial fair value of the contingent consideration was determined on the date of acquisition, June 1, 2016, using an income approach based on projected future net revenues of ICLUSIG in the European Union and other countries for the approved third line treatment over 18 years, and discounted to present value at a rate of 10 %.

The fair value of the contingent consideration is remeasured each reporting period, with changes in fair value recorded in the condensed consolidated statements of operations.

The valuation inputs utilized to estimate the fair value of the contingent consideration as of March 31, 2024 and December 31, 2023 included a discount rate of 10 % and updated projections of future net revenues of ICLUSIG in the European Union and other countries for the approved third line treatment.

The change in fair value of the contingent consideration during the three months ended March 31, 2024 was due primarily to fluctuations in foreign currency exchange rates impacting future revenue projections of ICLUSIG and the passage of time.

The valuation inputs utilized to estimate the fair value of the contingent consideration as of June 30, 2024 and December 31, 2023 included a discount rate of 10 % and updated projections of future net revenues of ICLUSIG in the European Union and other countries for the approved third line treatment.

The change in fair value of the contingent consideration during the three and six months ended June 30, 2024 was due primarily to fluctuations in foreign currency exchange rates impacting future revenue projections of ICLUSIG and the passage of time.

We generally make payments to Takeda Pharmaceutical Company Limited quarterly based on the royalties or any additional milestone payments earned in the previous quarter.

At March 31, 2024 and December 31, 2023, contingent consideration earned but not yet paid was $ 9.5 million and $ 10.3 million, respectively, and was included in accrued and other current liabilities.

At June 30, 2024 and December 31, 2023, contingent consideration earned but not yet paid was $ 8.9 million and $ 10.3 million, respectively, and was included in accrued and other current liabilities on the condensed consolidated balance sheets.

Concentration of Credit Risk and Current Expected Credit Losses

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In December 2009, we entered into a license, development and commercialization agreement with Eli Lilly and Company (“Lilly”).

The above collaboration partners comprised, in aggregate, 17 % and 20 % of the accounts receivable balance as of March 31, 2024 and December 31, 2023, respectively.

The above collaboration partners comprised, in aggregate, 18 % and 20 % of the accounts receivable balance as of June 30, 2024 and December 31, 2023, respectively.

For further information relating to these collaboration and license agreements, refer to Note 8.

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Product Revenues for the

Three Months Ended

Three Months Ended Percentage of Total Net

Product Revenues for the

Six Months Ended

June 30, June 30,

2024 2023 2024 2023

Customer A 15 % 17 % 16 % 17 %

3 unchanged sentences

Customer E 13 % 10 % 12 % 11 %

Customer F 10 % 10 % 10 % 9 %

We are exposed to risks associated with extending credit to customers related to the sale of products.

Customers A, B, C, D, and E comprised, in aggregate, 41 % and 40 % of the accounts receivable balance as of March 31, 2024 and December 31, 2023, respectively.

Customers A, B, C, D, E and F comprised, in aggregate, 52 % and 48 % of the accounts receivable balance as of June 30, 2024 and December 31, 2023, respectively.

The concentration of credit risk relating to our other product revenues or accounts receivable is not significant.

We assessed our collaborative and customer receivable assets as of March 31, 2024 according to our accounting policy for applying reserves for expected credit losses, noting minimal history of uncollectible receivables and the continued perceived creditworthiness of our third party sales relationships, upon which the expected credit losses were considered de minimis.

As of March 31, 2024 and December 31, 2023, we had no allowance for doubtful accounts.

Asset Acquisition

We assessed our collaborative and customer receivable assets as of June 30, 2024 according to our accounting policy for applying reserves for expected credit losses, noting minimal history of uncollectible receivables and the continued perceived creditworthiness of our third party sales relationships, upon which the expected credit losses were considered de minimis.

As of June 30, 2024 and December 31, 2023, we had no allowance for doubtful accounts.

On February 5, 2024, we entered into a purchase agreement with MorphoSys AG and MorphoSys US Inc., a wholly-owned subsidiary of MorphoSys AG (together with MorphoSys AG, “MorphoSys”), under which we gained exclusive global rights to tafasitamab, a humanized Fc-modified CD19-targeting immunotherapy marketed in the United States as MONJUVI (tafasitamab-cxix) and outside of the United States as MINJUVI (tafasitamab).

We previously had the rights to tafasitamab outside of the United States under our prior collaboration and license agreement with MorphoSys entered into in January 2020, which has now been terminated;

We previously had the rights to tafasitamab outside of the United States under a January 2020 collaboration and license agreement with MorphoSys, which has now been terminated;

therefore, this new agreement gave us all of the remaining global rights to tafasitamab.

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We will recognize revenue and costs for all U.S.

commercialization and clinical development and MorphoSys will no longer be eligible to receive future milestone, profit split and royalty payments under the now-terminated collaboration and license agreement with MorphoSys.

We evaluated the set of activities and assets acquired under the purchase agreement and concluded that it did not meet the definition of a business because the acquired set did not include a substantive process.

Therefore, the transaction was accounted for as an asset acquisition and the total purchase price, inclusive of direct transaction costs, was allocated to the acquired MONJUVI inventory, in accordance with applicable accounting guidance.

Therefore, the transaction was accounted for as an asset acquisition under U.S.

GAAP and the total purchase price, inclusive of direct transaction costs, was allocated to the acquired MONJUVI inventory, in accordance with applicable accounting guidance.

Under the purchase agreement, we have also become the successor to MorphoSys under its collaboration and license agreement with Xencor, Inc.

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In the event that (i) we terminate this agreement for convenience or (ii) Xencor terminates due to our material breach, our challenge of Xencor’s licensed patents or our insolvency, worldwide rights to develop, manufacture and commercialize licensed products, including tafasitamab, revert back to Xencor.

Escient Pharmaceuticals, Inc.

On May 30, 2024 we acquired all of the outstanding shares of common stock of Escient, a clinical-stage drug development company advancing novel small molecule therapeutics for systemic immune and neuro-immune disorders, for $ 782.5 million cash consideration, which included Escient's net cash remaining at the close of the transaction, subject to adjustments set forth in the merger agreement.

Escient’s lead molecule, EP262, is a first-in-class oral Mas-related G protein-coupled receptor X2 (MRGPRX2) antagonist that has the potential to treat a broad range of inflammatory disorders.

We accounted for the Escient transaction as an asset acquisition under U.S.

GAAP because EP262 represents substantially all of the fair value of the gross assets acquired.

In addition to the $ 782.5 million closing cash consideration per the terms of the merger agreement, we incurred $ 2.5 million of direct transaction costs that were included in the total consideration to be allocated to the acquired net assets.

Of the $ 785.0 million total consideration, we recognized related compensation expense of $ 31.5 million associated with the accelerated vesting for certain Escient stock awards in connection with the acquisition on our condensed consolidated statements of operations for the quarter ended June 30, 2024.

The following table summarizes allocation of the remaining U.S.

GAAP consideration, net of compensation expense, across the net assets acquired (in thousands):

Cash and cash equivalents $ 48,302

Marketable securities 3,988

Prepaid expenses and other current assets 1,663

In-process research and development assets 679,388

Deferred tax asset 44,811

Other non-current assets 4,110

Accounts payable and accrued expenses ( 26,611 )

Other current liabilities ( 1,022 )

Non-current liabilities ( 1,118 )

GAAP Consideration (net of compensation expense) $ 753,511

In-process research and development (“IPR&D”) assets are related to acquired clinical-stage product candidates:

lead candidate, EP262, and secondary candidate, EP547.

The fair value of IPR&D assets was based on the present value of future discounted cash flows, which was based on significant estimates.

These estimates included the number of potential patients and market prices of future product candidates, costs required to conduct clinical trials, future milestones and royalties payable under acquired license agreements, costs to receive regulatory approval and potentially commercialize product candidates, as well as estimates for probability of success and the discount rate.

The concluded allocated fair values for EP262 and EP547 was $ 644.8 million and $ 34.6 million, respectively.

As both acquired IPR&D assets do not have an alternative future use at the acquisition date, we recognized the full amount of $ 679.4 million as research and development expenses on our condensed consolidated statement of operations for the three and six months ended June 30, 2024.

Our inventory balance consists of the following (in thousands):

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Inventories, stated at the lower of cost and net realizable value, consist of raw materials, work in process and finished goods.

At March 31, 2024, $ 63.6 million of inventory was classified as current on the condensed consolidated balance sheet as we expect this inventory to be consumed for commercial use within the next twelve months.

At March 31, 2024, $ 264.3 million of inventory was classified as non-current on the condensed consolidated balance sheet as we did not expect this inventory to be consumed for commercial use within the next twelve months.

At June 30, 2024, $ 100.7 million of inventory was classified as current on the condensed consolidated balance sheet as we expect this inventory to be consumed for commercial use within the next twelve months.

At June 30, 2024, $ 255.3 million of inventory was classified as non-current on the condensed consolidated balance sheet as we did not expect this inventory to be consumed for commercial use within the next twelve months.

We obtain some inventory components from a limited number of suppliers due to technology, availability, price, quality or other considerations.

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Costs incurred prior to regulatory approval are recorded as research and development expense in our statements of operations.

At March 31, 2024, inventory with approximately $ 38.2 million of product costs incurred prior to regulatory approval had not yet been sold.

At June 30, 2024, inventory with approximately $ 34.9 million of product costs incurred prior to regulatory approval had not yet been sold.

We expect to sell the pre-commercialization inventory over the next 5 to 27 months and, as a result, cost of product revenues will reflect a lower average per unit cost of materials.

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In addition, we were initially eligible to receive up to $ 75.0 million of additional potential development and regulatory milestones relating to graft-versus-host-disease (“GVHD”).

Since the inception of the agreement through March 31, 2024, we have recognized and received, in the aggregate, $ 157.0 million for the achievement of development milestones, $ 345.0 million for the achievement of regulatory milestones, and $ 200.0 million for the achievement of sales milestones.

Since the inception of the agreement through June 30, 2024, we have recognized and received, in the aggregate, $ 157.0 million for the achievement of development milestones, $ 345.0 million for the achievement of regulatory milestones, and $ 200.0 million for the achievement of sales milestones.

We also are eligible to receive tiered, double-digit royalties ranging from the upper-teens to the mid-twenties on future JAKAVI net sales outside of the United States, and tiered, worldwide royalties on TABRECTA net sales that range from 12 % to 14 %.

We are obligated to pay to Novartis tiered royalties in the low single-digits on future JAKAFI net sales within the United States contingent on certain conditions.

During the three months ended March 31, 2024 and 2023, such royalties on net sales within the United States totaled $ 23.0 million and $ 23.4 million, respectively, and were reflected in cost of product revenues on the condensed consolidated statements of operations.

At March 31, 2024 and December 31, 2023, $ 398.6 million and $ 375.6 million, respectively, of accrued royalties were included in accrued and other current liabilities on the condensed consolidated balance sheets, payment of which is dependent on the outcome of a contract dispute with Novartis.

During the three and six months ended June 30, 2024, such royalties on net sales within the United States totaled $ 34.6 million and $ 57.6 million, respectively, and were reflected in cost of product revenues on the condensed consolidated statements of operations.

During the three and six months ended June 30, 2023, such royalties on net sales within the United States totaled $ 33.5 million and $ 56.9 million, respectively, and were reflected in cost of product revenues on the condensed consolidated statements of operations.

At June 30, 2024 and December 31, 2023, $ 433.2 million and $ 375.6 million, respectively, of accrued royalties were included in accrued and other current liabilities on the condensed consolidated balance sheets, payment of which is dependent on the outcome of a contract dispute with Novartis.

Each company is responsible for costs relating to the development and commercialization of ruxolitinib in its respective territories, with costs of collaborative studies shared equally.

Novartis is also responsible for all costs relating to the development and commercialization of capmatinib.

Product royalty revenue related to Novartis net sales of JAKAVI outside of the United States for the three months ended March 31, 2024 and 2023 was $ 89.6 million and $ 76.7 million, respectively.

Product royalty revenue related to Novartis net sales of TABRECTA worldwide for the three months ended March 31, 2024 and 2023 was $ 5.2 million and $ 4.2 million, respectively.

Product royalty revenue related to Novartis net sales of JAKAVI outside of the United States for the three and six months ended June 30, 2024 was $ 99.3 million and $ 188.9 million, respectively.

Product royalty revenue related to Novartis net sales of JAKAVI outside of the United States for the three and six months ended June 30, 2023 was $ 90.4 million and $ 167.1 million, respectively.

Product royalty revenue related to Novartis net sales of TABRECTA worldwide for the three and six months ended June 30, 2024 was $ 5.3 million and $ 10.5 million, respectively.

Product royalty revenue related to Novartis net sales of TABRECTA worldwide for the three and six months ended June 30, 2023 was $ 4.8 million and $ 9.0 million, respectively.

Lilly – Baricitinib

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Under this agreement, we were initially eligible to receive up to $ 150.0 million for the achievement of development milestones, up to $ 365.0 million for the achievement of regulatory milestones and up to $ 150.0 million for the achievement of sales milestones.

Since the inception of the agreement through March 31, 2024, we have recognized and received, in aggregate, $ 149.0 million for the achievement of development milestones, $ 335.0 million for the achievement of regulatory milestones and $ 50.0 million for the achievement of sales milestones.

Since the inception of the agreement through June 30, 2024, we have recognized and received, in aggregate, $ 149.0 million for the achievement of development milestones, $ 335.0 million for the achievement of regulatory milestones and $ 50.0 million for the achievement of sales milestones.

We are also eligible to receive tiered, double-digit royalties on future global sales with rates ranging up to the mid-twenties if a product is successfully commercialized.

Product royalty revenue related to Lilly net sales of OLUMIANT outside of the United States for the three months ended March 31, 2024 and 2023 was $ 30.6 million and $ 34.2 million, respectively.

Product royalty revenue related to Lilly net sales of OLUMIANT outside of the United States for the three and six months ended June 30, 2024 was $ 31.7 million and $ 62.3 million, respectively.

Product royalty revenue related to Lilly net sales of OLUMIANT outside of the United States for the three and six months ended June 30, 2023 was $ 32.0 million and $ 66.2 million, respectively.

In January 2015, we entered into a License, Development and Commercialization Agreement with Agenus Inc.

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Under this agreement, which was amended in February 2017, the parties have agreed to collaborate on the discovery of novel immuno-therapeutics using Agenus’ antibody discovery platforms.

Since the inception of the agreement through March 31, 2024, we have paid Agenus milestones totaling $ 30.0 million, and Agenus is eligible to receive up to an additional $ 500.0 million in future contingent development, regulatory and commercialization milestones across all programs in the collaboration.

As of March 31, 2024, we held an investment of approximately 12.1 million shares of Agenus Inc.

common stock.

The fair market value of our long term investment in Agenus Inc.

at March 31, 2024 and December 31, 2023 was $ 7.0 million and $ 10.0 million, respectively.

For the three months ended March 31, 2024 and 2023, we recorded an unrealized loss of $ 3.0 million and $ 10.6 million, respectively, based on the change in fair value of Agenus Inc.’s common stock during the respective periods.

Since the inception of the agreement through June 30, 2024, we have paid Agenus milestones totaling $ 30.0 million, and Agenus is eligible to receive up to an additional $ 500.0 million in future contingent development, regulatory and commercialization milestones across all programs in the collaboration.

As of June 30, 2024, we held an investment of approximately 0.6 million shares of Agenus Inc.

common stock, which reflects a one-for-twenty reverse stock split effected by Agenus Inc.

in April 2024.

The fair market value of our equity investment in Agenus Inc.

at June 30, 2024 and December 31, 2023 was $ 10.1 million and $ 10.0 million, respectively.

For the three and six months ended June 30, 2024, we recorded an unrealized gain of $ 3.1 million and $ 0.1 million, respectively, based on the change in fair value of Agenus Inc.’s common stock during the respective periods.

For the three and six months ended June 30, 2023, we recorded an unrealized gain of $ 0.9 million and an unrealized loss of $ 9.7 million, respectively, based on the change in fair value of Agenus Inc.’s common stock during the respective periods.

In December 2016, we entered into a Collaboration and License Agreement with Merus N.V.

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The collaboration encompasses up to ten independent programs.

Since the inception of the agreement through March 31, 2024, we have paid and expensed Merus milestones totaling $ 10.0 million.

As of March 31, 2024, we held an investment of approximately 4.0 million common shares.

The fair market value of our total long term investment in Merus at March 31, 2024 and December 31, 2023 was $ 180.3 million and $ 110.1 million, respectively.

For the three months ended March 31, 2024 and 2023, we recorded an unrealized gain of $ 70.2 million and $ 10.4 million, respectively, based on the change in fair value of Merus’ common shares during the respective periods.

Since the inception of the agreement through June 30, 2024, we have paid and expensed Merus milestones totaling $ 10.0 million.

During the second quarter of 2024, we sold approximately 3.0 million of Merus' common shares for proceeds of $ 160.6 million.

As of June 30, 2024, we held an investment of approximately 1.0 million common shares.

The fair market value of our equity investment in Merus at June 30, 2024 and December 31, 2023 was $ 59.6 million and $ 110.1 million, respectively.

For the three and six months ended June 30, 2024, we recorded realized and unrealized gains of $ 40.0 million and $ 110.2 million, respectively, based on the sale of shares and change in fair value of remaining Merus’ common shares during the respective periods.

For the three and six months ended June 30, 2023, we recorded an unrealized gain of $ 28.2 million and $ 38.6 million, respectively, based on the change in fair value of Merus’ common shares during the respective periods.

In October 2017, we entered into a Global Collaboration and License Agreement with MacroGenics, Inc.

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In March 2023, we made a $ 15.0 million regulatory milestone payment to MacroGenics for the FDA approval of ZYNYZ for the treatment of adults with Merkel cell carcinoma.

This milestone payment was capitalized as an intangible asset and included in Other intangible assets, net on the condensed consolidated balance sheet as of March 31, 2024, and is being amortized through cost of product revenues over the estimated useful life of 13.5 years.

Since the inception of the agreement, inclusive of the July 2022 amendment to the agreement, through March 31, 2024, we have paid MacroGenics developmental and regulatory milestones totaling $ 115.0 million.

After the amendment and subsequent payments, MacroGenics will be eligible to receive up to an additional $ 320.0 million in future contingent development and regulatory milestones, and up to $ 330.0 million in sales milestones as well as tiered royalties ranging from 15 % to 24 % of global net sales.

Research and development expenses for the three months ended March 31, 2024 and 2023 also included $ 12.1 million and $ 17.8 million, respectively, of development costs incurred pursuant to the MacroGenics agreement.

At March 31, 2024 and December 31, 2023, a total of $ 0.4 million and $ 0.3 million of such costs were included in accrued and other liabilities on the condensed consolidated balance sheets.

This milestone payment was capitalized as an intangible asset and included in Other intangible assets, net on the condensed consolidated balance sheet as of June 30, 2024, and is being amortized through cost of product revenues over the estimated useful life of 13.5 years.

Since the inception of the agreement, inclusive of the July 2022 amendment to the agreement, through June 30, 2024, we have paid MacroGenics developmental and regulatory milestones totaling $ 115.0 million.

On July 24, 2024, the parties further amended the agreement, with Incyte agreeing to pay MacroGenics $ 100.0 million now in exchange for MacroGenics’ agreement to waive future milestones for squamous cell anal cancer and non-small cell lung cancer.

After these amendments and subsequent payments, MacroGenics will be eligible to receive up to an additional $ 210.0 million in future contingent development and regulatory milestones, and up to $ 330.0 million in sales milestones as well as tiered royalties ranging from 15 % to 24 % of global net sales.

Research and development expenses for the three and six months ended June 30, 2024 also included $ 13.2 million and $ 25.3 million, respectively, of development costs incurred pursuant to the MacroGenics agreement.

Research and development expenses for the three and six months ended June 30, 2023 also included $ 12.1 million and $ 29.9 million, respectively, of development costs incurred pursuant to the MacroGenics agreement.

At June 30, 2024 and December 31, 2023, a total of $ 0.6 million and $ 0.3 million of such costs were included in accrued and other liabilities on the condensed consolidated balance sheets.

As described in Note 6, on February 5, 2024, we entered into a purchase agreement with MorphoSys that became effective as of that date, as a result of which we now hold exclusive global rights for tafasitamab, a humanized Fc-modified CD19-targeting immunotherapy marketed in the United States as MONJUVI (tafasitamab-cxix) and outside of the United States as MINJUVI (tafasitamab).

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Each company was responsible for funding any independent development activities, and we were responsible for funding development activities specific to territories outside of the United States.

As of March 31, 2024, we held an investment of approximately 3.6 million American Depository Shares, each representing 0.25 of an ordinary share of MorphoSys AG.

The fair market value of our long term investment in MorphoSys AG as of March 31, 2024 and December 31, 2023 was $ 65.8 million and $ 35.9 million, respectively.

For the three months ended March 31, 2024 and 2023, we recorded an unrealized gain of $ 29.9 million and $ 1.4 million, respectively, based on the change in fair value of MorphoSys AG's ordinary shares during the respective periods.

During May 2024, as part of the Novartis tender offer for MorphoSys' outstanding shares, we sold all of our 3.6 million American Depository Shares, each representing 0.25 of an ordinary share of MorphoSys AG, for proceeds of $ 66.6 million.

The fair market value of our equity investment in MorphoSys AG as of June 30, 2024 and December 31, 2023 was $ 0.0 million and $ 35.9 million, respectively.

For the three and six months ended June 30, 2024, we recorded realized and unrealized gains of $ 0.8 million and $ 30.7 million, respectively, based on the sale of shares and change in fair value of MorphoSys AG's ordinary shares during the respective periods.

For the three and six months ended June 30, 2023, we recorded an unrealized gain of $ 12.7 million and $ 14.1 million, respectively, based on the change in fair value of MorphoSys AG's ordinary shares during the respective periods.

Our 50 % share of the United States loss or profit for the commercialization of tafasitamab for the period from January 1, 2024 to the asset acquisition on February 5, 2024, was a profit of $ 1.0 million, and is recorded as (Profit) and loss sharing under collaboration agreements on the condensed consolidated statement of operations.

As described in Note 6, subsequent to the asset acquisition, we will recognize revenue and costs for all commercialization and clinical development of tafasitamab in the United States.

Our 50 % share of the United States profit or loss for the commercialization of tafasitamab for the three months ended March 31, 2023 was a profit of $ 1.4 million, and is recorded as (Profit) and loss sharing under collaboration agreements on the condensed consolidated statement of operations.

Our 50 % share of the United States profit or loss for the commercialization of tafasitamab for the three and six months ended June 30, 2023 was a profit of $ 0.5 million and $ 1.9 million, respectively, and is recorded as (Profit) and loss sharing under collaboration agreements on the condensed consolidated statement of operations.

Research and development expenses for the period from January 1, 2024 to the asset acquisition on February 5, 2024, includes $ 10.7 million, related to our 55 % share of the co-development costs for tafasitamab.

Research and development expenses for the three months ended March 31, 2023, includes $ 25.2 million, related to our 55 % share of the co-development costs for tafasitamab.

At March 31, 2024 and December 31, 2023, $ 3.5 million and $ 18.8 million, respectively, was included in accrued and other liabilities on the condensed consolidated balance sheets for amounts due to MorphoSys under the former agreement.

Research and development expenses for the three and six months ended June 30, 2023, includes $ 20.3 million and $ 45.5 million, respectively, related to our 55 % share of the co-development costs for tafasitamab.

At June 30, 2024 and December 31, 2023, $ 0.0 million and $ 18.8 million, respectively, was included in accrued and other liabilities on the condensed consolidated balance sheets for amounts due to MorphoSys under the former agreement.

In September 2021, we entered into a Collaboration and License Agreement with Syndax Pharmaceuticals, Inc.

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Each company is responsible for funding any independent development activities.

Inclusive of an upfront, non-refundable payment, since the inception of the agreement through March 31, 2024, we have made payments of $ 117.0 million to Syndax, which were previously recorded in research and development expense.

Inclusive of an upfront, non-refundable payment, since the inception of the agreement through June 30, 2024, we have made payments of $ 117.0 million to Syndax, which were previously recorded in research and development expense.

Syndax is eligible to receive up to $ 220.0 million in future contingent development and regulatory milestones and up to $ 230.0 million in sales milestones as well as tiered royalties ranging in the mid-teens on net sales in Europe and Japan and low double digit percentage on net sales in the rest of the world outside of the United States.

As of March 31, 2024, we held an investment of approximately 1.4 million shares of Syndax common stock.

The fair market value of our long term investment in Syndax as of March 31, 2024 and December 31, 2023 was $ 33.8 million and $ 30.7 million.

For the three months ended March 31, 2024 and 2023, we recorded an unrealized gain of $ 3.1 million and an unrealized loss of $ 6.2 million, respectively, based on the change in fair value of Syndax’s common stock during the respective periods.

Research and development expenses for the three months ended March 31, 2024, includes $ 7.1 million related to our 55 % share of the co-development costs for axatilimab.

At March 31, 2024 and December 31, 2023, $ 1.9 million and $ 1.8 million, respectively, was included in accrued and other liabilities on the condensed consolidated balance sheet for amounts due to Syndax under the agreement.

As of June 30, 2024, we held an investment of approximately 1.4 million shares of Syndax common stock.

The fair market value of our long term investment in Syndax as of June 30, 2024 and December 31, 2023 was $ 29.2 million and $ 30.7 million.

For the three and six months ended June 30, 2024, we recorded an unrealized loss of $ 4.6 million and $ 1.5 million, respectively, based on the change in fair value of Syndax’s common stock during the respective periods.

For the three and six months ended June 30, 2023, we recorded an unrealized loss of $ 0.2 million and $ 6.4 million, respectively, based on the change in fair value of Syndax’s common stock during the respective periods.

Research and development expenses for the three and six months ended June 30, 2024, includes $ 4.7 million and $ 11.8 million, respectively, related to our 55 % share of the co-development costs for axatilimab.

Research and development expenses for the three and six months ended June 30, 2023, includes $ 6.2 million and $ 11.8 million, respectively, related to our 55 % share of the co-development costs for axatilimab.

At June 30, 2024 and December 31, 2023, $ 2.6 million and $ 1.8 million, respectively, was included in accrued and other liabilities on the condensed consolidated balance sheet for amounts due to Syndax under the agreement.

China Medical Systems Holdings Limited

In March 2024, we entered into a Collaboration and License Agreement with China Medical System Skinhealth, a wholly-owned dermatology medical aesthetic company and subsidiary of China Medical System Holdings Limited (“CMSHL”), for the development and commercialization of povorcitinib, a selective oral JAK1 inhibitor, in certain indications in certain Asian territories.

In March 2024, we recognized an upfront payment under this agreement of $ 25.0 million upon our transfer of the functional intellectual property related to povorcitinib to CMSHL which was recorded in milestone and contract revenues on the condensed consolidated statement of operations for the three months ended March 31, 2024.

We are eligible to receive additional potential development and commercial milestones, as well as royalties on net sales of the licensed product in CMSHL’s territory.

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Property and equipment, net $ 762,009 $ 751,513

In May 2024, we purchased additional property in Wilmington, Delaware including land, office buildings and parking garages for a purchase price of $ 48.7 million.

As of June 30, 2024 we capitalized $ 4.9 million of land and recorded approximately $ 43.8 million of construction in progress relating to the office buildings and parking garages.

Accrued and Other Current Liabilities

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Total accrued and other current liabilities $ 1,034,316 $ 935,569

Stock Compensation

Stockholders' Equity

2010 Stock Incentive Plan.

In May 2010 the Board of Directors adopted the 2010 Stock Incentive Plan (the “2010 Stock Plan”), which was most recently amended in April 2023, for issuance of common stock to employees, non-employee directors, consultants, and scientific advisors.

Awards under the 2010 Stock Plan include stock options, RSUs and PSUs.

Awards under the 2010 Stock Plan include stock options, restricted stock units (“RSUs”) and performance shares (“PSUs”).

2024 Inducement Stock Incentive Plan.

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A total of 1,000,000 shares of common stock are reserved for issuance pursuant to the 2024 Inducement Plan.

We recorded $ 59.8 million and $ 53.4 million of stock compensation expense on our condensed consolidated statements of operations for the three months ended March 31, 2024 and 2023, respectively.

Stock compensation expense included within our condensed consolidated statements of operations included research and development expense of $ 36.8 million and $ 31.0 million for the three months ended March 31, 2024 and 2023, respectively.

Stock compensation expense included within our condensed consolidated statements of operations also included selling, general and administrative expense of $ 22.4 million and $ 21.6 million for the three months ended March 31, 2024 and 2023, respectively.

Stock compensation expense included within our condensed consolidated statements of operations also included cost of product revenues of $ 0.6 million and $ 0.8 million, respectively, for the three months ended March 31, 2024 and 2023.

Share Repurchase and Modified "Dutch Auction" Tender Offer.

On May 13, 2024 we announced that our Board of Directors approved a share repurchase authorization of $ 2.0 billion.

Subsequently, we commenced a modified “Dutch Auction” tender offer to repurchase shares of our common stock for an aggregate purchase price of up to $ 1.672 billion (the “tender offer”).

We offered to purchase up to $ 1.672 billion in value of our common stock at a price not greater than $ 60.00 per share nor less than $ 52.00 per share, net to the seller in cash, less any applicable withholding taxes and without interest, upon the terms and subject to the conditions set forth in the tender offer documents that were distributed to stockholders.

A modified “Dutch Auction” tender offer allows stockholders to indicate how much stock they wish to tender and at what price within the range described above.

Based on the number of shares tendered and the prices specified by the tendering stockholders, we determined the lowest price per share that enabled us to purchase $ 1.672 billion of common stock at such price, or a lower amount depending on the number of shares that are properly tendered and not properly withdrawn.

On June 13, 2024 we completed the tender offer and repurchased 27,866,666 shares at a price of $ 60.00 per share for an aggregate price of approximately $ 1.672 billion, excluding fees and related expenses, pursuant to the tender offer which expired at 12:00 midnight, at the end of the day, New York City time on June 10, 2024.

In addition, on May 12, 2024, we entered into a separate stock purchase agreement with Julian C.

Baker (a member of our Board of Directors), Felix J.

Baker, and entities affiliated with Julian C.

Baker, including funds advised by Baker Bros.

Advisors LP (collectively, the “Baker Entities”), to repurchase up to $ 328.0 million of our common stock.

This would enable the Baker Entities to maintain their ownership level as of May 9, 2024 of approximately 16.4 % of Incyte’s outstanding common stock.

The Baker Entities purchase was to be at the same price per share as is determined and paid in the tender offer.

On June 26, 2024, we repurchased 5,459,183 shares at a price of $ 60.00 per share for an aggregate price of approximately $ 328.0 million pursuant to the terms of the stock purchase agreement with the Baker Entities.

We account for share repurchases as retirements, whereby it reduces common stock and additional paid-in capital by the amount of the original issuance, with any excess purchase price recorded as a reduction to retained earnings (accumulated deficit).

Any transaction costs, including the excise tax, directly associated with the share repurchases are included as part of the purchase price.

Under this method, the issued and outstanding shares of common stock are reduced by the number of shares of common stock repurchased, and no treasury stock is recognized on the condensed consolidated financial statements.

A total of 33,325,849 common shares were repurchased during June 2024 at a price of $ 60.00 for an aggregate purchase price of approximately $ 2.0 billion.

We incurred $ 24.3 million in fees and expenses associated with the share repurchase, which included $ 19.2 million for excise taxes on share repurchases in accordance with the Inflation Reduction Act of 2022.

We currently expect to pay the excise tax in the second quarter of 2025.

These costs were recognized within (Accumulated deficit) retained earnings on the condensed consolidated balance sheet during the three months ended June 30, 2024 as costs to repurchase the Company’s common stock.

The purchased shares were cancelled and ceased to be outstanding.

Stock Compensation

We recorded $ 56.6 million and $ 116.4 million of stock compensation expense on our condensed consolidated statements of operations for the three and six months ended June 30, 2024, respectively.

We recorded $ 54.5 million and $ 107.9 million of stock compensation expense on our condensed consolidated statements of operations for the three and six months ended June 30, 2023, respectively.

Stock compensation expense included within our condensed consolidated statements of operations included research and development expense of $ 34.5 million, $ 71.3 million, $ 32.8 million and $ 63.8 million for the three and six months ended June 30, 2024 and 2023, respectively.

Stock compensation expense included within our condensed consolidated statements of operations also included selling, general and administrative expense of $ 21.7 million, $ 44.1 million, $ 20.9 million and $ 42.5 million for the three and six months ended June 30, 2024 and 2023, respectively.

Stock compensation expense included within our condensed consolidated statements of operations also included cost of product revenues of $ 0.4 million, $ 1.0 million, $ 0.8 million and $ 1.6 million, respectively, for the three and six months ended June 30, 2024 and 2023.

Additionally, as described in Note 6, as part of the Escient acquisition, during the three and six months ended June 30, 2024, we recognized related compensation expense of $ 31.5 million associated with the accelerated vesting for certain Escient stock awards in connection with the acquisition on our condensed consolidated statements of operations.

We utilized the Black-Scholes valuation model for estimating the fair value of the stock compensation granted, with the following weighted-average assumptions:

Employee Stock Options Employee Stock Purchase Plan

For the Three Months Ended For the Three Months Ended

March 31, March 31,

For the Three Months Ended For the Six Months Ended For the Three Months Ended For the Six Months Ended

June 30, June 30,

2024 2023 2024 2023 2024 2023 2024 2023

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Options cancelled ( 198,243 ) $ 84.53

Balance at March 31, 2024 12,914,325 $ 84.29

Balance at June 30, 2024 12,942,495 $ 84.15

Our annual stock option grants generally have a 10 -year term and vest over four years , with 25 % vesting after one year and the remainder vesting in 36 equal monthly installments.

Restricted stock unit (“RSU”) and performance share (“PSU”) award activity under the 2010 Stock Plan and 2024 Inducement Plan was as follows:

RSU and PSU award activity under the 2010 Stock Plan and 2024 Inducement Plan was as follows:

Shares Subject to

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RSUs cancelled ( 122,580 ) $ 71.83

Balance at March 31, 2024 7,135,819 $ 71.29

Balance at June 30, 2024 7,080,132 $ 71.11

RSUs and PSUs are granted to our employees at the share price on the date of grant.

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Compensation expense for PSUs with market performance conditions is calculated using a Monte Carlo simulation model as of the date of grant and recorded over the requisite service period.

For the three months ended March 31, 2024 and 2023 we recorded $ 3.4 million and $ 6.5 million, respectively, of stock compensation expense for PSUs on our condensed consolidated statements of operations.

For the three and six months ended June 30, 2024 we recorded $ 3.5 million and $ 6.9 million, respectively, of stock compensation expense for PSUs on our condensed consolidated statements of operations.

For the three and six months ended June 30, 2023 we recorded $ 2.7 million and $ 9.2 million of stock compensation expense for PSUs on our condensed consolidated statements of operations.

The following table summarizes our shares available for grant under the 2010 Stock Plan and 2024 Inducement Plan.

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Options, RSUs and PSUs cancelled 443,403

Balance at March 31, 2024 10,752,837

Balance at June 30, 2024 10,698,039

Based on our historical experience of employee turnover, we have assumed an annualized forfeiture rate of 5 % for our options, RSUs and PSUs.

Under the true-up provisions of the stock compensation guidance, we will record additional expense if the actual forfeiture rate is lower than we estimated, and will record a recovery of prior expense if the actual forfeiture is higher than we estimated.

Total compensation cost of options granted but not yet vested, as of March 31, 2024, was $ 30.6 million, which is expected to be recognized over the weighted average period of approximately 1.1 years.

Total compensation cost of RSUs granted but not yet vested, as of March 31, 2024, was $ 204.3 million, which is expected to be recognized over the weighted average period of approximately 1.6 years.

Total compensation cost of PSUs granted but not yet vested, as of March 31, 2024, was $ 13.3 million, which is expected to be recognized over the weighted average period of 1.2 years, should the underlying performance conditions be deemed probable of achievement.

For the three months ended March 31, 2024 and 2023, we recorded the following provisions for income taxes and effective tax rates as compared to our income before provision for income taxes (in thousands):

Total compensation cost of options granted but not yet vested, as of June 30, 2024, was $ 24.1 million, which is expected to be recognized over the weighted average period of approximately 1.0 years.

Total compensation cost of RSUs granted but not yet vested, as of June 30, 2024, was $ 165.1 million, which is expected to be recognized over the weighted average period of approximately 1.4 years.

Total compensation cost of PSUs granted but not yet vested, as of June 30, 2024, was $ 10.1 million, which is expected to be recognized over the weighted average period of 1.0 years, should the underlying performance conditions be deemed probable of achievement.

For the three and six months ended June 30, 2024 and 2023, we recorded the following provisions for income taxes and effective tax rates as compared to our income before provision for income taxes (in thousands):

Three Months Ended

Income before provision for income taxes $ 236,159 $ 51,856

June 30, Six Months Ended

2024 2023 2024 2023

(Loss) income before provision for income taxes $ ( 389,777 ) $ 277,604 $ ( 153,618 ) $ 329,460

Provision for income taxes 54,824 74,056 121,435 104,209

Effective tax rate ( 14.1 )% 26.7 % ( 79.0 )% 31.6 %

Our effective tax rate for the three months ended March 31, 2024 and 2023 was higher than the U.S.

Our effective tax rate for the three and six months ended June 30, 2024 was higher than the U.S.

statutory rate primarily due to non-deductible charges of $ 710.9 million associated with the Escient acquisition.

Our effective tax rate for the three and six months ended June 30, 2023 was higher than the U.S.

statutory rate primarily due to foreign losses with no associated tax benefit (i.e., full valuation allowance) and an increase in our valuation allowance against certain U.S.

federal and state deferred tax assets offset to a lesser extent by tax rate benefits associated with research and development and orphan drug tax credit generations and the foreign derived intangible income deductions.

The effective tax rate for the three months ended March 31, 2024 decreased as compared to the prior year period primarily due to the decrease in foreign losses with no associated tax benefit, and to a lesser extent, the tax effects of unrealized gains on long term investments.

The balance of our unrecognized tax benefits (including penalties and interest) increased by $ 4.2 million during the three months ended March 31, 2024.

This movement was primarily driven by increases related to prior period tax positions of $ 3.1 million and $ 1.4 million of interest and penalties.

federal and state deferred tax assets.

This was partially offset by tax rate benefits associated with research and development and orphan drug tax credit generations and the foreign derived intangible income deduction.

The effective tax rate for the three and six months ended June 30, 2024 was unfavorable as compared to the prior year period primarily due to the non-deductible charges associated with the Escient acquisition.

As described in Note 6, as part of the Escient acquisition, we recorded $ 44.8 million of deferred tax assets predominately related to net operating losses and capitalized researched and development costs.

The balance of our unrecognized tax benefits (including penalties and interest) increased by $ 19.3 million during the six months ended June 30, 2024.

This movement was primarily driven by increases related to prior period tax positions of $ 7.5 million, increases related to acquired reserves of $ 8.8 million, and $ 3.0 million of interest and penalties.

We accrue interest and penalties related to unrecognized tax benefits as a component of its provision for income taxes.

One or more of our legal entities file income tax returns in the U.S.

and in certain foreign jurisdictions.

Our income tax returns may be examined by tax authorities in those jurisdictions.

Significant disputes may arise with tax authorities involving issues such as the timing and amount of deductions, the use of tax credits and allocations of income and expenses among various tax jurisdictions because of differing interpretations of tax laws and regulations and relevant facts.

In the U.S., the statute of limitations remains open beginning with tax year 2020.

We are currently under U.S.

federal audit for tax year 2021.

The Organization for Economic Cooperation and Development Pillar 2 guidelines, which were supported by over 130 countries worldwide, are designed to impose a 15% global minimum tax on adjusted financial results.

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Although many aspects of Pillar 2 remain to be clarified, at this time there are no material impacts on our effective tax rate .

Net Income Per Share

Net income per share was calculated as follows for the periods indicated below:

Net (Loss) Income Per Share

Net (loss) income per share was calculated as follows for the periods indicated below:

Three Months Ended

Basic net income $ 169,548 $ 21,703

June 30, Six Months Ended

2024 2023 2024 2023

Basic net (loss) income $ ( 444,601 ) $ 203,548 $ ( 275,053 ) $ 225,251

Weighted average common shares outstanding 218,175 223,248 221,329 223,104

Basic net income per share $ 0.76 $ 0.10

Diluted net income $ 169,548 $ 21,703

Basic net (loss) income per share $ ( 2.04 ) $ 0.91 $ ( 1.24 ) $ 1.01

Diluted net (loss) income $ ( 444,601 ) $ 203,548 $ ( 275,053 ) $ 225,251

Weighted average common shares outstanding 218,175 223,248 221,329 223,104

Dilutive stock options and awards — 2,401 — 2,437

Weighted average shares used to compute diluted net income per share 227,219 225,589

Diluted net income per share $ 0.75 $ 0.10

The potential common shares that were excluded from the diluted net income per share computation are as follows:

Weighted average shares used to compute diluted net (loss) income per share 218,175 225,649 221,329 225,541

Diluted net (loss) income per share $ ( 2.04 ) $ 0.90 $ ( 1.24 ) $ 1.00

All stock options and stock awards were excluded from the diluted share calculation for the three and six months ended June 30, 2024 because their effect would have been anti-dilutive, as we were in a net loss position.

The potential common shares that were excluded from the diluted net (loss) income per share computation are as follows:

Three Months Ended

June 30, Six Months Ended

2024 2023 2024 2023

Outstanding stock options and awards 16,067,125 12,806,418 16,148,294 10,781,677

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Employees may contribute a portion of their compensation, which is then matched by us, subject to certain limitations.

Defined contribution expense for the three months ended March 31, 2024 and 2023 was $ 5.4 million and $ 5.6 million, respectively.

Defined contribution expense for the three and six months ended June 30, 2024 was $ 5.2 million and $ 10.6 million, respectively.

Defined contribution expense for the three and six months ended June 30, 2023 was $ 4.0 million and $ 9.6 million, respectively.

Defined Benefit Pension Plans

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Three Months Ended

June 30, Six Months Ended

2024 2023 2024 2023

Service cost $ 2,657 $ 1,733 $ 5,278 $ 3,821

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Commitments and Contingencies

In August 2021, we entered into a revolving credit and guaranty agreement, which was subsequently amended in May 2023 and June 2024 (as amended, the “Credit Agreement”), among Incyte Corporation, as borrower, our subsidiary Incyte Holdings Corporation, as a guarantor, a group of lenders (the “Lenders”), and J.P.

Morgan Chase Bank, N.A., as administrative agent.

Under the Credit Agreement, the Lenders have committed to provide an unsecured revolving credit facility in an aggregate principal amount of up to $ 500.0 million.

The June 2024 amendment to the Credit Agreement extended the maturity date of the revolving credit facility from August 2024 to June 2027.

We may increase the maximum revolving commitments or add one or more incremental term loan facilities to the Credit Agreement, subject to obtaining commitments from any participating lenders and certain other conditions, in an amount not to exceed (1) $ 250.0 million plus (2) an additional amount, so long as after giving effect to the incurrence of such additional amount, our pro forma consolidated leverage ratio would not exceed 0.25 :1.00 above our consolidated leverage ratio in effect immediately prior to giving effect to such increase.

Loans under the Credit Agreement will bear interest, at our option, at a per annum rate equal to either (a) a base rate (but not less than 1.00 %) plus an applicable rate per annum varying from 0.125 % to 0.875 % depending on our consolidated leverage ratio or (b) a rate based on the secured overnight financing rate (“SOFR”) plus a credit spread adjustment of 0.10 % (but not less than 0.00 %), plus an applicable rate per annum varying from 1.125 % to 1.875 % depending on our consolidated leverage ratio.

Commitment fees payable on the undrawn commitment range from 0.15 % per annum to 0.225 % per annum, based on our consolidated leverage ratio.

We may, at our option, prepay any borrowings under the Credit Agreement, in whole or in part, at any time and from time to time without premium or penalty, subject to customary exceptions.

As of June 30, 2024 and December 31, 2023, we had no outstanding borrowings and were in compliance with all covenants under this facility.

Contingencies

In the ordinary course of our business, we may become involved in lawsuits, proceedings, and other disputes, including commercial, intellectual property, regulatory, employment, and other matters.

We record a reserve for these matters when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated.

We have entered into the collaboration agreements described in Note 8, as well as various other collaboration agreements that are not individually, or in the aggregate, significant to our operating results or financial condition at this time.

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Under these agreements, we may be required to pay upfront fees, milestone payments, and royalties on sales of future products.

In the ordinary course of our business, we may become involved in lawsuits, proceedings, and other disputes, including commercial, intellectual property, regulatory, employment, and other matters.

We record a reserve for these matters when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated.

We brought a lawsuit against the U.S.

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We believe that such a reading would violate CMS’s statutory authority and be arbitrary and capricious given that OPZELURA, among other differentiators, is indicated to treat entirely different medical conditions and entirely different patient populations than JAKAFI.

As of March 31, 2024, we have accrued approximately $ 73.7 million within accrued and other current liabilities on the condensed consolidated balance sheet, relating to the incremental rebates that would be owed were OPZELURA considered a line extension of JAKAFI.

The impact on OPZELURA gross to net deductions for the quarter ending March 31, 2024 is approximately 7.2 %.

As of June 30, 2024, we have accrued approximately $ 91.1 million within accrued and other current liabilities on the condensed consolidated balance sheet, relating to the incremental rebates that would be owed were OPZELURA considered a line extension of JAKAFI.

The impact on OPZELURA gross to net deductions for the quarter ending June 30, 2024 is approximately 6.8 %.

If OPZELURA is not treated as a line extension of JAKAFI, this would result in a reversal of our accrual and a lower future gross to net deduction for OPZELURA.

In addition, as described in Note 8, we have an outstanding contractual dispute with Novartis relating to royalties on JAKAFI net sales within the United States.

Subsequent Event

In April 2024, Incyte and a wholly-owned subsidiary of Incyte (“Merger Sub”) entered into an agreement and plan of merger (the “Merger Agreement”) with Escient Pharmaceuticals, Inc.

(“Escient”), pursuant to which Merger Sub will merge with and into Escient and Escient will become a wholly-owned subsidiary of Incyt e.

Escient is a clinical-stage drug development company advancing novel small molecule therapeutics for systemic immune and neuro-immune disorders.

Upon the terms and subject to the conditions set forth in the Merger Agreement, we will acquire Escient for consideration of $ 750.0 million plus Escient’s net cash remaining at the close of the transaction, subject to adjustments set forth in the Merger Agreement .

The acquisition is subject to clearance under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, among other customary conditions, and will become effective promptly following the satisfaction or waiver of these conditions.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements